Editorial: The key questions for KiwiRail as it fronts on ferries

An artist's impression of what the new custom-designed, zero carbon mega ferry would look like.

OPINION

KiwiRail bosses are this week being hauled before a select committee to look back on what can only be described as an annus horribilis for the state-owned enterprise.

Last year began with a mayday call as one of the Interislander ferries lost power and drifted dangerously close to Wellington’s South Coast with 864 people on board, and ended with a bombshell from the new coalition Government.

Just before Christmas, Finance Minister Nicola Willis decided enough was enough and declined the latest in a string of additional funding requests for the iRex project.

First pitched in 2018 with a price tag of $775 million, the project promised to revolutionise Cook Strait travel with two new hybrid, rail-enabled mega ferries, and new terminals in Wellington and Picton.

By December 2023 that cost had quadrupled to $3 billion.

The dramatic budget blowout was fuelled by the portside infrastructure, not the two new ferries. A $551m fixed-price contract to build them was signed with Hyundai Mipo Dockyard in 2021.

Initially when the Government declined KiwiRail’s latest $1.47b funding bid, CEO Peter Reidy said the contract for the new ferries would be terminated. The whole project would be wound down.

But within days his tone had intriguingly changed.

In an interview with RNZ’s Kathryn Ryan, he started talking about ways the deal could be salvaged. He said Hyundai was very keen to work through options, one of which could be to still build the ships - but then sell them and lease them back.

KiwiRail CEO Peter Reidy.

Of course we’d still need new portside infrastructure for the ships. In that same interview, Reidy said the key reason such infrastructure was so expensive was because it had a 100-year resilience design life. Costs could be brought down by reducing the design to a 20-year life.

When pressed about whether this all meant we could still get the mega ferries, Reidy said: “That could be an option, yes.”

Reidy will front the Transport and Infrastructure Select Committee on Thursday for an annual review of KiwiRail, and a key focus for committee members will have to be the mega ferries. What can be salvaged from that 2021 contract?

The new ships were set to arrive in New Zealand in 2025 and 2026. The plan was always for our existing fleet to see us through until then.

Given that’s now only a year away, it’s hard to see how we’ll secure at least one new vessel without renegotiating the current deal we have with Hyundai. How would we get another so quickly, and for a 2021 price?

There’s also an important question to be asked around what is the absolute limit to which we can push our current ferries. Some would argue they’re already well past their best, but we could be relying on them for at least the next two to three years.

Willis has said the Government “remains committed to a resilient, safe and reliable Cook Strait connection”, but is that possible with the current fleet?

Because as much as iRex became about damning headlines and eye-watering figures, what this is all really about is lives and livelihoods. And what figure can you really put on futureproofing and safeguarding one of our most important trade and travel routes?

If the deal with Hyundai still holds any promise, then this Thursday could provide the first glimmer of hope.